[payaza2000]

Hey can anyone let me know if I am doing the formation of a corporation, I will be making up a fact pattern ( I am worried ill get a sim on this)

There are two partners who form a corporation each owing a share (50%) , so they will have to report a recognized gain if it applies? If one of the shareholders in question owned 80% they would not!

Shareholder A contributes Land with a Fair Market Value of $40,000; Adjusted Basis of $20,000, and Cash of $5,000 contributed to corporation; secured by a liability of $5,000

A: would have a realized gain of $20,000; recognized gain of $0; and his basis in the newly formed corporation will be $20,000 ( Adj Basis+ Cash- Liability assumed by corporation) If cash was received by Shareholder “A” this would be deducted from the calculation of a gain

Corporations Basis: A’s Basis: $20,000

Shareholder B contributes a building with a Fair Market Value of $50,000; Adjusted Basis of $30,000 secured by a mortgage of $40,000

B: would have a realized gain of $20,000 (FMV- Adjusted Basis); recognized gain of $10,000 (Adjusted Basis- Mortgage); and a Basis in new corporation of $0 (since liability exceeds Adjusted Basis).

Corporations Basis: B’s Basis: $0 + Gain $10,000.

Conversely if this where a partnership each partner would decrease their partnership by the amount of liabilities that the other partners are assuming; and you would still use Adjusted Basis.

My question is was I correct overall? But more specifically in the calculation of the Corporations Basis?

FAR 5/6/2015- 84
REG 8/3/2015 - 87
AUD 10/25/2015- 69 1/20/2016 -75
BEC 2/26/2016- 80

Thank you God